Kudler Fine Foods is a specialty food store founded by Kathy Kudler to provide customers a wide selection of high-quality ingredients. The first store opened in 1998 in La Jolla, California and was immediately successful, leading to two additional locations over the next five years. Kudler is committed to serving customers by stocking the best foods and tools to realize their culinary visions. Legal matters are handled informally through Kathy's sister-in-law, who is a tax attorney, keeping costs low. The stores work to anticipate customer needs through inventory management and forecasting based on historical sales data.

1. Kudler Fine Foods
Passionate about gourmet cooking and frustrated at having to travel all over
town to gather the ingredients for one simple meal, Kathy Kudler decided to
open her own gourmet food shop. Her vision was to create one store that would
stock a wide selection of the freshest ingredients as well as all of the tools a
gourmet cook could ever want. Kathy was certain that combining the
convenience of one-stop shopping with reasonable prices would be a recipe for
success.
Kathy's vision became a reality in 1998 with the opening of the La Jolla store.
Her concept was an immediate success and in two years Kudler's expanded with
the opening of the Del Mar location. Our latest store opened in Encinitas in 2003
and we are already looking for just the right spot for another shop!
Kudler Fine Foods is committed to providing our customers with the finest
selection of the very best foods and wines so that your culinary visions can come
true. Thank you for your patronage and giving us the opportunity to serve you.
Legal Overview
Kudler Fine Foods uses Anne Shousha as its legal counsel. Anne is Kathy Kudler’s
sister-in-law and is a successful tax attorney working with a major accounting firm in San
Diego, CA.
Kathy is the only person in the company that talks with Anne. Other than a standing order
that any "slip and fall" accidents are to be immediately reported to Kathy, each store
manager is free to determine what legal issues need to be referred to Kathy. Once an
issue is reported to Kathy, she will decide whether to ask Anne for advice.
Generally, Kathy asks Anne for legal advice during informal telephone calls or at family
gatherings. Occasionally, Anne will meet formally with Kathy and the attorneys for the
store’s insurance carrier. So far, Anne has not been charging Kathy for the telephone calls
and has only charged her $100 per hour for the formal meetings she has attended.
Through this arrangement, Kathy has managed to keep the company’s legal expenses to a
minimum.
To date, Kudler’s has had only a few customer accidents that have ended in litigation. In
each case, Anne suggested that Kathy agree to a settlement, telling her that, "going to
court is like throwing dice."

2. Kudler’s uses very few custom forms, preferring instead to use forms (contracts, order
forms, etc.) that are supplied by the parties the company is dealing with. For example, the
leases on the stores were contracts supplied by the lessors. The few customized forms the
company uses were obtained from "off-the-shelf" computer programs and slightly
modified by Kathy or her assistant.
Supply Chain
Purchasing
There is no purchasing department in any of the stores although standard purchasing
procedures are in place. Each of the three department managers in each store determines
requirements for the items their department sells and places purchase orders directly with
suppliers using a purchase order form that is standard between the three stores. It is the
responsibility of the Department Managers to obtain the best price, quality, and delivery
possible. They also receive and verify all orders in terms of whether they received the
correct items and quantities and in undamaged conditions. Received items are
documented on an Order Received form and sent to Accounting so that invoices for the
items can be paid.
The three department managers are encouraged to check with their counterparts at the
other stores on the pricing, quality, and delivery of the merchandise they order. They are
also encouraged to combine orders between their stores if they feel there would be a cost
savings resulting from ordering a larger quantity of a particular item or multiple items.
Kathy also places purchase orders. Kathy’s purchases relate mostly to unique, capital, or
repair items that might be required by an individual store or for items used by all three
stores, such as bulk Purchase Orders or Receiving forms.
Prepared purchase order forms are either mailed, handed to supplier salesmen, faxed to
suppliers, or sent by E-mail if acceptable to suppliers. Whatever the method used, a
purchase order form is always filled out initially and becomes the key tracking and
financial document for an order.
Advertising
Advertisements are prepared for local newspapers by Kathy. Advertised specials are
offered at all three stores simultaneously. Kathy coordinates the items on sale with the
store managers from each store during her weekly operations review meetings to make
sure adequate supplies of merchandise will be on hand. Merchandise can be shifted
between stores should one store have a higher demand of an item than another store, time
permitting.

3. Accounting
Accounting data is collected by the point-of-sale terminals (cash registers) that are used
in each store at check-out to record all items, quantities, prices, taxes and totals for all
daily sales transactions.
Inventory Management
Excess inventory is always a concern since it represents company monies being tied up in
merchandise that is not moving or generating further income. Excesses can also lead to
write-downs of the merchandise.
The department managers are responsible for maintaining high customer service levels
for the items they sell, which means carrying higher levels of inventory, but not excessive
service levels. Kathy’s policy is that adequate levels of inventory should be maintained to
assure that stock-outs do not occur more than 2-3 times a year. This customer service
level is discussed during Kathy’s monthly operations review meeting and adjustments to
merchandise stocking levels made if warranted. A customer service level of 95% has
been a general goal for a number of items carried. 95% means that 95% of the time a
customer will find merchandise available in a store. 5% of the time there will be no
merchandise due to a previous stock-out. The store decides on an item-by-item basis
whether a rain check will be offered customers if an item is out of stock.
Forecasting
Forecasting which items to carry and how much to carry in the future has always been a
challenge. Kathy and her department managers utilize historical data on which items and
what quantities were sold in the last 2-3 years, especially on holidays. This provides an
indication of which items and what quantities to carry in the future. Forecasts are
basically an extrapolation of past history to the future. In an increasing sales market, the
trend extrapolating forecast works fairly well. The difficulty has always been in
determining the forecast’s turning points, from increasing sales to decreasing for
example, since significant errors can occur at these points. This is a reoccurring topic in
monthly operations review meetings in which monthly sales are reviewed for the last year
and monthly forecasts prepared for the next three months, a quarterly forecast for the
quarter after that, and for six months for the next six-month period after that. The
accuracy of this forecasting method has not been as good as desired and has resulted in
the obsoleting of some merchandise and in offering others at drastic discounts.
Merchandise Selection and Pricing
The Kudler stores are no different from any other store in that business success is geared
to being able to provide total customer satisfaction. One way to satisfy customers is to
offer a changing selection of gourmet foods as they become available since customers
always appear to be demanding something new. Kathy considers one of her key
responsibilities to be that of identification of new gourmet items that can be offered in her

4. stores. To keep up with what’s available, Kathy monitors what other gourmet foods
stores are offering, what’s being advertised in gourmet magazines, what is being shown
at gourmet conventions, and what shows up on gourmet Web sites.
After finding some new and interesting items, Kathy usually obtains a small amount of
each item and introduces them at one of her operations review meetings. The managers
attending the meeting get to sample the items and to offer their comments, suggestions
and recommendations on whether to offer the items or not.
In checking on all the new items, especially on what competitors are offering, Kathy is
also in a position to determine what current selling prices for the items are. With this
information, Kathy and her staff then discuss if and when merchandise prices should be
changed and by how much.